It means any offer of securities or invitation to subscribe securities to a select group of person by a company other than by way of public offer

It means issue of shares to existing shareholders in proportion as the circumstances permit.

2.

Separate Bank Account

Share application money is received in Separate Bank Account

No need for separate Bank Account in case of issue to the existing shareholders

3.

Valuation Report

Valuation report is mandatory in case of Private Placement

Valuation report is mandatory only in case of issue to existing non-resident shareholder

4.

Shareholders’ approval

Shareholders’ approval is required by way of SR.

No need to take approval of shareholders of the Company. Approval of Board is sufficient for right issue

5.

Minimum Subscription

It must be of Rs. 20,000 of face value

No Minimum Subscription required

6.

Renounce the offer letter

No such right is available for the shareholders.However rights for accept/reject the offer letter is available to the shareholders

Shareholders have rights to Renounce/accept/reject the offer letter within a minimum period of 15 days subject to the maximum of 30 days

7.

Refund of Share application money

If the allotment is not made within a period of 60 days from the receipt of money then, the company shall repay the application money within next 15 days. Further, if the Company fails to repay that amount within the aforesaid period then it shall be liable to repay the amount with an interest @ 12% per annum from the expiry of 60 days.This application money will be treated as deposit after the expiry of 60 days.

If allotment is not made within a period of 60 days from the receipt of application money. However, there is no provision relating payment of interest @ 12% nor does it prescribe to repay within next 15 days (after the expiry of 60 days).This application money will be treated as deposit after the expiry of 60 days.

8.

Simultaneous issue of shares

As per section 42 (3) of Companies Act, 2013 no fresh offer and allotment can be made unless allotment w.r.t any offer made earlier have been completed

There is no such provision in section 62(1)(a) (Rights Issue).

9.

Timeline

Since this process involves Shareholders meeting, Valuation Report, etc, it takes more time to do a Preferential Issue.

No, Minimum subscription is not required in the Right Issue of a Private Company. Right issue is a right given to existing shareholders of the Company either to avail the offer and subscribe the shares in the decided proportion or to renounce the shares offered unless articles provide otherwise.

No, Minimum subscription is not required in the Right Issue of a Private Company. Right issue is a right given to existing shareholders of the Company either to avail the offer and subscribe the shares in the decided proportion or to renounce the shares offered unless articles provide otherwise.

In our opinion, a company making right issue cannot utilise the share application money before the allotment of share, because as per Explanation to Rule 2(1)(vii) of the Companies (Acceptance of Deposits) Rules, 2014, if the securities for which application money or advance for such securities was received cannot be allotted within sixty days from the date of receipt of the application money or advance for such securities and such application money or advance is not refunded to the subscribers within fifteen days from the date of completion of sixty days, such amount shall be treated as a deposit.

Yes, a public company’s shareholders can renounce their right shares in favor of any person and person includes a company. As per section 62 sub section 1 clause (a) sub clause (ii), unless the articles of the company otherwise provide, the offer aforesaid shall be deemed to include a right exercisable by the person concerned to renounce the shares offered to him or any of them in favor of any other person.

No, Company shall not receive any money after the time period of offer letter under private placement. The offer letter is approved by shareholders, thus, the company cannot do anything contradictory to the terms and conditions contained in the offer letter. If the company wants to receive money after the time period mentioned in the offer letter, it has to follow the entire procedure again starting from the passing of appropriate board resolution including obtaining the shareholders approval to the offer letter.